Don't Out-Innovate Your Competition

This is the fourth article in the series "Are you Sure Your Software Business is Ready for Growth?". Incorrect focus is a top growth obstacle. As your business evolves from stage to stage, your organization's focus and skills need to follow. This series will help you spot the warning signs that it is time to shift gears, and give your business the chance it deserves.

You've been working hard for years to be where you are today. Your product is selling, new releases roll out at the steady pace to a faithful customer base. You have established your place in the market.

Unfortunately, so did the competition.

And here you are: fighting to deliver a never-ending stream of features. But the return you get from an increasing investment in new features is not what it used to be. The product is becoming increasingly complex, and the users expectations higher.

In addition, new players are entering the game. Fresh ideas and new technologies are emerging, all threatening your competitive advantage.

It's time to innovate.

Innovation is refreshing and can re-ignite the passion in your team. But it can also cause a tremendous waste of time and resources. And despite the increasing body of advice out there, much of it is often misunderstood.

So let me challenge some of the common approaches to innovation and offer alternative ways to think about them.

Don't Install an Idea Box

One common approach is to install an idea box. A central place where any employee can submit their idea.

Alas, installing an idea database often leads to lots of frustration, and a risk to abandon the whole initiative.

Software companies don't lack ideas and requests for improvement. Often, the biggest problem is the sheer amount of ideas you will get. The idea databases tend to fill up quickly with suggestions in different areas, various levels of maturity and detail. Evaluating and comparing all of these ideas tends to be very time consuming. Not being able to follow up and provide timely feedback to the people who submitted ideas will lead to their frustration, and reduced motivation to participate in the initiative.

Steria Benelux estimated that they would need 2 full time equivalents just to manage and follow up on the ideas. Their case was described in the book on software innovation written by my Sirris colleagues.

Don't Think Outside The Box

Another problem with open ideation initiatives is the quality of ideas that get generated. In an initiative by Arnold Schwarzenegger to get ideas from citizens of California on how to improve their state, an overwhelming response was: legalize marijuana.

If you ask your team to come up with innovative ideas, you are risking:

  • Broad, fluffy and abstract ideas
  • Technology for the sake of technology
  • Solutions to long standing, frustrating operational problems with little or no impact on company growth

The cause: too broad question. The common advice to think broadly and "outside the box" fails to deliver actionable suggestions that will lead to company's goals.

Remedy? Focus the ideation around concrete goals.

If I had one hour to save the world, I would spend fifty-five minutes defining the problem and only five minutes finding the solution. Albert Einstein

Take the time to define concrete and measurable innovation targets, linked to growth of your business. For example:

  • Generate 10 product concepts that would allow us to adapt our enterprise software for the SME market
  • Define a minimal version (< 1 person-month of implementation effort) that would allow us to test the new product concept with 10 potential customers
  • Come up with 5 suggestions to address product usability issues identified in the usability testing sessions of last month. For each suggestion, describe how to get users' feedback before implementing the improvement

Don't Listen to Your Customers

"If I asked my people what they wanted, they would have said faster horses". Henry Ford.

Of course you should listen to your customers. :-) In fact, be obsessive about getting as much information you can from them.

But don't do what they say. Do this instead:

  • Listen beyond what they are saying. Instead of implementing their suggestions, dig deeper to understand the underlying problem. Ask "5 whys" to get to the root-cause
  • Listen to as many different customers as you can. Then search for common ground. The key is finding patterns
  • Scope down the problem. Search for the 80% of problem that can be solved by 20% of solution
  • Look at other products - even other industries that solved a similar problem. As the urban legend goes, NASA commissioned a $1M solution for a pen that can write in space, while the Russians just used a pencil

Don't Follow Your Best Practices

In his book "Best Practices Are Stupid: 40 Ways to Out-Innovate the Competition", Steve Shapiro talks about the need to innovate the way we innovate. When it comes to innovative projects, approaching them the same way we approach other projects will not lead to breakthroughs.

This is especially true if you are embarking on new product development. Your company is optimized for executing your proven business model. A new product may require an alternative business model to succeed in the marketplace. Searching for a new business model within the same organization will inevitably cause frictions.

In fact, I would suggest to treat the new product development as a startup.

Don't Build New Products

Innovation implies new things. But you don't necessarily need to build a completely new product to grow your software business.

There are many other ways to innovate:

  • Find alternative ways to make money with your existing product. For example, we are working with a market leader with 20+ years of B2B product development. They are currently experimenting with increasing their market share by offering (parts of their) product through a subscription or pay-per-use basis to occasional users. Here are a couple of more inspiring examples business model innovations
  • Today's users of software products get bombarded from all sides. Find a way to make your product stand out, or to make it more engaging. E.g. exploit emerging data sources (social networks, sensors available on the mobile phone) to make your product more relevant for the user
  • Look at the assets you built throughout the years and think about alternative products or services you could derive. For example, Automatic Data Processing is a US-based company that processes payroll data. Based on aggregation of data they collect, they have launched ADP Employment Report, a new product they sell to investors, HR departments and governments.

Don't Out-Innovate Your Competition

"Don’t focus on the competition, they’ll never give you money." – Jeff Bezos, CEO Amazon

To be in a market means to compete. There is a strong temptation to engage in a never-ending feature war with your competition. After all, the customers may be requesting you to implement features your competitor has.

Although some of this is unavoidable, it is not a strategy that is sustainable on the long term. The real winners will be those who dare to challenge the established assumptions. Sometimes, even doing less can ensure a strong positioning.

Of course, taking on the role of an innovation leader in a market puts you to a vulnerable position. You have to take all the risk, and the competition can cherry pick and copy those innovations that have survived in the marketplace.

This does not mean that you do not need to do it. It means that it's a game that never stops. 

Innovation is a word that is often used by different people meaning different things. I wonder what your view is. Feel free to share it in comment section below.

I hope you enjoyed the article. Our core competence is helping companies come up with software innovations. Heck, we even wrote a book about it. Why not book a free meeting with our experts?